____ Tax-Free Acquisitive Reorganizations General considerations Statutory merger A reorganization Stock-for-stock exchange B reorganization Stock-for-asset exchange C [more...]
Escrowed Stock Stock put into escrow at closing can be considered stock and not other property, provided: Target shareholders must have voting rights Target shareholders must have dividend rights Amount of stock put into escrow cannot exceed the amount of stock issued outright If escrowed shares are used to satisfy an indemnity liability: No [more...]
Acquisition Taxation: Foreign Corporate Buyers Per IRC § 367 Statute provides that if buyer is a foreign corporation ("Foreign") Receipt of Foreign stock by Target shareholders Even though incident to a reorganization Will be a taxable exchange, unless provided otherwise in regulations IRS regulations (1996) [more...]
D Reorganizations Summary Per IRC §§ 368(a)(1)(A) and 368(a)(2)(D) Target merges into a subsidiary of Buyer Target shareholders receive merger consideration in exchange for their Target stock No requirement that voting stock be used Target-Sub merger must qualify as an A reorganization Merger must be effected under [more...]
General Utilities doctrine was repealed by the Tax Reform Act of 1986 Now corporations recognize gain on almost all distributions of appreciated property to shareholders: A corporation distributing appreciated property to a shareholder is deemed to have sold that property to the shareholder at the property's fair market value, recognizing [more...]
Per IRC § 351 " Double dummy" Mergers a/k/a top hat or double wing merger Can be used to avoid COI requirement Which applies to IRC § 368 reorganizations but not to IRC § 351-reliant transactions Allows greater use of cash while still avoiding tax on stock portion Sometimes used in Mergers of Equals Use [more...]
Tax-Free Acquisitive Reorganizations General Considerations Statutory Merger: A Reorganization Forward Triangular Merger: D Reorganization Reverse Triangular Merger: E Reorganization Stock-For-Stock Exchange: B / Triangular B Reorganization Stock-For-Asset Exchange: C / Triangular C Reorganization Taxable Acquisitions [more...]
Net Operating Loss Carryovers Summary Per IRC § 382 IRC § 382 limits a corporation's ability to utilize existing net operating loss carryovers ("NOLs") following an ownership change Ownership change is triggered by one or more shareholders increasing their stock ownership by more than 50 percentage points Within a [more...]
E Reorganizations Summary Per IRC §§ 368(a)(1)(A) and 368(a)(2)(E) Sub of Buyer merges into Target No legal transfer of Target assets occurs Often desirable for regulatory or contractual reasons Sub stock is converted into Target stock Target shareholders receive merger consideration in exchange for their Target stock [more...]
A Reorganizations Summary Per IRC § 368(a)(1)(A) Target merges directly into Buyer Target shareholders receive merger consideration in exchange for their Target stock Merger must be under state or federal law Foreign mergers, amalgamations or consolidations are ineligible Because of the continuity of interest requirement, a [more...]
C and Triangular C Reorganizations C reorganization Summary Per IRC § 368(a)(1)(C) Buyer acquires substantially all the assets of Target solely in exchange for voting stock of Buyer transferred to Target Assumption of Target's liabilities doesn't violate "solely for voting stock" requirement Under a special rule, up to 20% [more...]
B and Triangular B Reorganizations B Reorganization Summary Per IRC § 368(a)(1)(B) Buyer acquires stock of Target directly from the Target shareholders solely in exchange for voting stock of Buyer Target shareholders can exchange their Target stock only for Buyer voting stock Buyer must control Target after the [more...]
Seller recognizes gain or loss on an asset-by-asset basis amount of gain or loss ordinary vs capital Buyer determines its basis in the acquired assets on an asset-by-asset basis Buyer recognizes gain if it acquires the assets in exchange for appreciated property, other than its own stock IRS generally respects the parties allocation of [more...]
General Considerations Overview Types of Tax-free Acquisitive Reorganizations Per IRC § 368 Statutory Merger A Reorganization Forward Triangular Mergers D Reorganization Reverse Triangular Merger E [more...]
Summary Selling shareholders recognize gain or loss Buyer recognizes gain (or loss) on any appreciated (depreciated) property used to acquire Target stock Other than its own stock Buyer has a fair market value basis in the acquired stock No change to the basis of Target assets or to the other tax attributes of Target Target's future use of [more...]